By James Caldwell, PWTorch.com assistant editor

WWE's cash on-hand was approximately $300 million to start 2008. After four dividend payments to shareholders and two quarters of lackluster profit, WWE's cash flow has decreased significantly.

In the company's latest earnings report this week, WWE reported approximately $80 million in cash, representing a 73.3 percent decrease in cash from the start of last year.

Zacks, a leading financial analysis service, says it's unfeasible for WWE to continue paying out dividends at such a high rate when the company's profitability has shrunk the past two quarters.

"At some point, it becomes unsustainable to pay the dividend, unless profits rise sharply," Zacks says.

At the conclusion of WWE's conference call with investors on Tuesday, there was a heated exchange between an investor questioning the dividend and WWE CFO George Barrios, who was trying to defend the company's dividend policy.

Zacks says WWE didn't have a clear answer on how they are going to sustain the dividend considering cash is steadily decreasing. If cash is going out, money needs to be coming in. That's not happening.

"It doesn't make sense to you," Barrios told the investor, but our rationale is to manage the company in such a way that over the long-term, we're going to continue to increase the cash flow of the company.

He added: "The next level of decisions we have to make is how much do we need to invest in the business and how much to return to shareholders. And our dividend policy currently reflects our best judgment on how to do that."

Zacks warns this is a very short-term policy and the dividend will continue to be paid out. The next scheduled payment is March. However, investors should be concerned in the long-term about the company's available cash.

"You may be buying the stock for the dividend right now, but eventually, the cash won't be there to pay it," Zacks says. "Buyer beware."

Caldwell's Analysis: It's a matter of pride for WWE right now. Before issuing their fourth quarter 2008 earnings, the company issued a press release bragging about the 15 percent dividend yield the company pays out in cash. The idea is to attract investors to buy company stock, but the high dividend yield coupled with a low stock price and dwindling cash is going to scare investors away. WWE should cut the dividend payout rate, but that would require admitting that the policy is misguided. That would be tough considering they've bragged about the dividend policy for several quarters.

Link: Zacks.com article.

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